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Oil prices rose as much as $1 on Friday, extending gains from the previous session, supported by hopes of a China demand boost and after data showed lower U.S. fuel inventories following a winter storm that hit at the end of the year.
Brent crude futures were 75 cents, or 1 per cent, higher at $79.44 a barrel at 0645 GMT, after settling 85 cents stronger at $78.69 on Thursday.
U.S. West Texas Intermediate crude futures were up 74 cents, or 1 per cent, at $74.41 a barrel. They had settled 83 cents higher at $73.67 in the previous session.
“China’s reopening optimism, especially further stimulus measures to boost the property sector, is the main bullish factor for the oil prices, which has improved the demand outlook in the near year,” said Tina Teng, an analyst at CMC Markets.
“A softened U.S. dollar has also added upside momentum to the oil markets,” she added.
China announced more state support measures on Thursday, including establishing a dynamic adjustment mechanism on mortgage rates for first-time home buyers, in a bid to boost its highly indebted property sector, which accounts for a quarter of the country’s economy.
The total number of passenger trips via road, rail, water and air during the upcoming Lunar New Year is expected to reach 2.1 billion this year, transport officials said on Friday, double the 1.05 billion during the same period last year.
Daily passenger flights scheduled during the holiday season beginning on Saturday are averaging 73 per cent of pre-pandemic levels in 2019.
China, the world’s largest crude oil importer, has ended its stringent zero-COVID policy, leading to a surge in COVID infections across the country.
In the U.S., data from the Energy Information Administration (EIA) showed on Thursday that distillate inventories, which include diesel and heating oil, dropped more than expected in the week to Dec. 30. They fell by 1.4 million barrels, compared with expectations of a 396,000-barrel drop.
Meanwhile, U.S. gasoline stocks fell 346,000 barrels last week, according to the EIA data, compared with analysts’ expectations for a 486,000-barrel drop.
On a weekly basis, however, oil prices were on track to end lower, with both the Brent and WTI contracts down around 7 per cent on a week earlier. Concern about the possibility of a global recession have weighed on trading sentiment.
“Oil is trying to rally but demand concerns are keeping the gains small,” said Edward Moya, senior market analyst at OANDA, in a note.
“The Saudis are slashing prices as the short-term crude demand outlook seems like it won’t quite get a major boost from a robust China reopening.”
The world’s top crude exporter Saudi Arabia lowered prices for the flagship Arab light crude it sells to Asia to its lowest since November 2021 amid global pressures hitting oil.
